Accounting principles (1) First Grade

DO IT! 2
The worksheet for Hancock Company shows the following in the financial statement
columns:
Owner’s drawings $15,000
Owner’s capital $42,000
Net income $18,000
Prepare the closing entries at December 31 that affect owner’s capital.

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E4-7
Victoria Lee Company had the following adjusted trial balanc

Instructions

(a) Prepare closing entries at June 30, 2017.

(b) Prepare a post-closing trial balance.

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Accounting principles (1) First Grade

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E4-8
Okabe Company ended its fiscal year on July 31, 2017. The company’s adjusted trial

balance as of the end of its fiscal year is shown below.

Instructions
(a) Prepare the closing entries using page J15.
(b) Post to Owner’s Capital and No. 350 Income Summary accounts. (Use the three-column form.)
(c) Prepare a post-closing trial balance at July 31.

Solution
(a)
General Journal J15
Date Account Titles Ref. Debit Credit
July 31 Service Revenue .................................. 400 64,000
Rent Revenue ...................................... 429 6,500
Income Summary ....................... 350 70,500

31 Income Summary ................................ 350 78,600

Salaries and Wages Expense .... 726 55,700
Utilities Expense......................... 732 14,900
Depreciation Expense ................ 711 8,000

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Accounting principles (1) First Grade
31 Owner’s Capital ................................... 301 8,100
Income Summary ....................... 350 8,100

31 Owner’s Capital ................................... 301 16,000

Owner’s Drawings ...................... 306 16,000

(b)

Owner’s Capital No. 301

Date Explanation Ref. Debit Credit Balance
July 31 Balance ✓ 45,200
31 Close net loss J15 8,100 37,100
31 Close drawing J15 16,000 21,100

Income Summary No. 350

Date Explanation Ref. Debit Credit Balance
July 31 Close revenue J15 70,500 70,500
31 Close expenses J15 78,600 (8,100)
31 Close net loss J15 8,100 0

(c) OKABE COMPANY

Post-Closing Trial Balance
July 31, 2017

Debit Credit
Cash .................................................................... $9,840
Accounts Receivable ......................................... 8,780
Equipment .......................................................... 15,900
Accumulated Depreciation—Equipment .......... $ 7,400
Accounts Payable .............................................. 4,220
Unearned Rent Revenue .................................... 1,800
Owner’s Capital .................................................. 21,100
$34,520 $34,520

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Accounting principles (1) First Grade
E4-14
The adjusted trial balance for McCoy Bowling Alley at December 31, 2017, contains the following accounts.

Instructions
(a) Prepare a classified balance sheet; assume that $20,000 of the note payable will be paid in 2018.
(b) Comment on the liquidity of the company.
Solution

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